![]() 274(d), specific proof is necessary to substantiate deductions for away- from- home travel and business gift expenses, and deductions related to listed property. In general, the Code does not require the records to be in a specific form. Substantiation requirementsĪn employee must be able to substantiate a deduction for an unreimbursed business expense by keeping (and producing for the IRS, if requested) adequate records. The burden is not shifted if the taxpayer presents incredible or implausible evidence, even if that evidence is not controverted. However, the burden of proof switches to the IRS if an individual taxpayer produces credible evidence in support of an expense, has complied with the substantiation requirements for the expense, has maintained all required records for the expense, and has cooperated with reasonable requests by the IRS for witnesses, information, documents, meetings, and interviews regarding the expense.Ĭredible evidence is evidence that, after critical analysis, the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted (without regard to the judicial presumption of IRS correctness). Should the tax return be audited or a notice of deficiency be received, the taxpayer generally has the burden of proof. 1986), that a taxpayer's lack of knowledge that his employer had a policy of reimbursing such expenses was not relevant to whether he could take a deduction for the expenses on his personal return. The Ninth Circuit held in Orvis, 788 F.2d 1406 (9th Cir. This is true regardless of why an employee does not seek reimbursement for a business expense incurred on behalf of his or her employer. Thus, if an employee incurs an expense that he or she has a right to reimbursement for under an expense reimbursement plan of his or her employer, but the employee fails to obtain reimbursement for the expense, the employee cannot take a Sec. Also, business expenses are not "necessary" if reimbursement is possible ( Podems, 24 T.C. To prevent a taxpayer from obtaining a double benefit, only unreimbursed business expenses are deductible. ![]() An expense is necessary if it is appropriate and helpful to the taxpayer's business it does not have to be required to be considered necessary. ![]()
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